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Shares of Freddie Mac soared Monday, nearly doubling in price on the first trading day after the second-largest provider of U.S. home mortgage funding posted its first quarterly profit in two years.
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CNBC.com Freddie Mac |
For the first time in four quarters, Freddie Mac [FRE
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] also said on Friday it would not need a capital injection from the Treasury to maintain its business of providing credit for U.S. housing. Freddie Mac's second-quarter earnings were released after the closing bell on Friday.
As the housing market showed signs of stabilizing, mortgage values rose in the quarter, reversing some previous losses that Freddie Mac suffered during the housing market's two-year meltdown.
"Part of Freddie's rebound is the reflection of the rebound in those mortgage values," said Charles Lieberman, chief investment officer at Advisors Capital Management, in Paramus, N.J., whose company owns preferred shares of Fannie Mae.
"I think the ultimate losses could turn out to be less than feared simply because the market had gotten extremely negative on both companies."
Freddie's stock nearly doubled in price, jumping 90.5 percent before noon on Monday — up from Friday's adjusted close of 74 cents.
In contrast, shares of rival Fannie Mae [FNM
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] rose 33.3 percent to 88 cents shortly before noon in NYSE trading. That was close to Fannie's intraday high of 89 cents.
Freddie's and Fannie's stock prices have plummeted from where they were two years ago, when the credit crisis began.
On Aug. 10, 2007, Freddie Mac's stock closed at $61.95 in NYSE trading. On that same date, Fannie Mae's stock ended at $66.46 on the NYSE.
"The stock had been written off almost completely. It was as if investors thought the company was going to be liquidated (or) turned into some sort of unproductive asset," Lieberman said.
Last week, Fannie Mae reported a loss Thursday and said it still needed government capital to survive.
"I think the market is reevaluating the prospects for Freddie and Fannie with the thought now being that just maybe, at some point down the road, these companies would become viable once again," Lieberman said.
Data is a real-time snapshot *Data is delayed at least 15 minutes